Listener: 7 January, 1995.

Keywords: Macroeconomics & Money;

The new emperor, a decent man, was sad. His country was not doing well. True, most people who wanted them had jobs, and most people seemed well fed, and clothed. But he also wanted his country to be great and strong.

There came to his door, a man called Roger who was well dressed. He said by following his advice a country would be great and strong, and everyone would have a job, and be well fed and clothed. The Emperor would be remembered as being great and good, and would be able to wear very smart suits. Now the Emperor, who was a decent man (as we said before, because it is an important part of the story) was at first uncertain about this fellow, despite his suit, although he hankered for one himself.

“Put me and other suited ones in charge,” said Roger, “and you will have wealth beyond imagination, not to mention the very best suit that money can buy.” The Emperor may have been a decent man (there, I have said it again) but he did not know much about economics and took Roger on as chief adviser, who looked into the treasure chest and found it empty. Except for a number of IOUs made out by the Emperor’s father, who had said that while people had jobs, and were reasonably well fed and clothed, the IOUs did not matter: they were just pieces of paper.

Roger was dismayed. He introduced a new tax on everything, even food and clothing. Revenue rolled into the treasure chest. “But,” said Roger, “we must pay all the suited ones”, (and to be truthful there seemed to be a lot of hangers on). By the time they had been paid consultancy fees, and taxation was lowered on those who wore suits, the treasure chest was still empty, except for the IOUs.

“Next,” said Roger, “is to stop paying out to all the empire’s businesses,” who received so many grants that no-one could work out the overall effect. That became clear when they were removed, because herds were slaughtered and factories closed down.

“No worries,” said the Rogers, “your country is becoming an international financial centre, with all the suited ones sharing in the wealth produced by shuffling bits of paper.” The court jester asked if Roger had not criticised the Emperor’s father for that, but was told that this paper shuffling was not subsidized by the Emperor so it was legit. The jester was clapped into a dungeon.

The Emperor was still finding it difficult to pay anyone, because there were fewer old businesses, and the new ones paid no tax. The fire brigade had been reduced, all the more unfortunate because when the paper shufflers had a fire, all their wealth went up in flames.

“Bother,” said Roger, “but we can solve the problem by selling off the Emperor’s estates. I know just the people to sell them for you.” And before you could say “free enterprise” there was a queue of suits at the door shouting “gimmee.”

The sale of the Emperor’s assets certainly reduced the IOUs, but also the revenue, so the treasure chest remained bare, except for credit card invoices. The countryside was looking bare too. People could not find jobs, and many were without food and clothing, not to mention housing which had burned down. Foodbanks littered the land. Some thought the economy had been thoroughly rogered.

“How,” said the Emperor, “am I ever to get my new suit?”

“You are spending too much on the poor” said Roger. Now the Emperor, a thoroughly decent man as we have had on occasion to remark, was somewhat nervous about slashing the alms with so much hurt in the land. “You must finish the job,” said Roger, “there is no time for cups of tea.” The Emperor wondered who could afford a cup of tea if the poor relief was pruned, but there was nothing left in the treasure chest so what else could he do.

Miraculously the economy began expanding. The jester was not surprised. If a country is sufficiently devastated it will scale down to a much lower level, and then grow again. There will still be core unemployment and poverty.

The Emperor was surprised. The nation was impoverished by the seven years of advice from Roger, but at last it seemed to be on an upwards path, albeit a much poorer one. He called a great banquet for the suited ones. He wore his best suit, the one handed down from his father. They dined sumptuously.

Carried away by the moment, this thoroughly decent man said “nobody starves in my country.” The crowd cheered. If the Emperor said so, it must be true. Except for young Toby, who said there were people starving. The crowd turned on the lad. They would have beaten him to an inch of his life for being discourteous to the Emperor, except the Commissioner for Children said that such actions was outlawed by the Convention on Children’s Rights